Small businesses often feel like a family. You’re a small group, perhaps you socialize outside of work or have a company baseball team where everybody gets along great. The idea that one of your employees might sue you never enters your mind—until one of them does. And as far as the law is concerned, no matter how much you like your employees, they are still your employees. And the law has ‘protections’ in place for employees. When you run a small business, you need take steps to protect yourself and your company.

The ABCs of employee lawsuits

Most employee lawsuits stem from behavior on the job and by their very nature they can be difficult to defend. Discrimination, harassment and retaliation make up the lion’s share of suits filed against employers. The U.S. Equal Employment Opportunity Commission (EEOC) protects employees if they are a member of a “protected class” such as race, religion, gender, age, and disability. And what many employers do not know is that the EEOC can prosecute on behalf of claimants—which means that your employee may not even need to have an attorney in order to file a suit against you.

An employee must show four things in order to file a discrimination or harassment complaint with the EEOC:

That he/she is a member of a protected class

That he/she is qualified and performing in a satisfactory manner

That he/she suffered an adverse employment action because he/she was a member of a protected class.

The good news is that just because the court allows the suit to proceed doesn’t mean that you have lost. It simply means that you now have the burden to prove that the employment action you took was for legitimate business reasons. This is where documentation really counts, such as written warnings, performance reviews, time cards, evaluations, disciplinary actions, etc.

If you have an employee handbook which outlines your policies and procedures it will likely be your most valuable asset in an employee lawsuit. Your handbook should contain policies on:

Discrimination, harassment and retaliation

Any disciplinary processes

The procedure to take in making complaints

Such policies should also include an open door policy for reporting all complaints of discrimination, harassment and retaliation. It’s also wise to have employee training in your anti-discrimination policies.

Best practices for protecting against employee lawsuits

To help reduce and avoid preventable employee lawsuits, the following is a good guide to use:

Hire an experienced employment attorney. Even though you have a small business and you need to control costs, downloading template policies from the Internet will not protect you. An experienced attorney understands the federal, state, and local laws that apply to employment and he or she can keep you in compliance with these laws.

A comprehensive employee handbook. If your handbook does not cover discrimination, harassment and retaliation, then it is incomplete. Your attorney can help you draft a proper handbook that protects both you and your employees.

Know employment law. Even if you have an attorney, you would be well-advised to become familiar with employment laws yourself. Ignorance of the law is never an effective defense.

Document everything. Every action taken with employees should be documented. Just as you would keep comprehensive book keeping records, so should you keep comprehensive employee records. And since former employees may also have standing to sue you, it’s wise to maintain records for at least ten years.

Don’t assume you are too small a fish to fry. Small business owners can wrongly believe that since they have few assets no one will bother suing them. However, that type of assumption can land you in court. In some cases, you may only need an annual revenue of $500,000 and as few as four employees to be legally liable.

Unfortunately, employee lawsuits are not diminishing. Employees sue their employers and former employers in the hundreds of thousands every year. To ensure you are protected talk to an experienced NY business litigation attorney about your current situation. Your attorney can help you determine how best approach your employee dispute.